Working with friends? Building MarsBased #3

There is a recurring piece of advice in the startup world that says you should never mix friendship with business. However, after 12 years of profitability and organic growth at MarsBased, reality has taught us that working with friends is not only possible but can be a competitive advantage if expectations are managed from day zero.

In this episode of Building MarsBased, I open up the black box of our founding story to explain how Xavi, Jordi, and I went from being classmates to co-founders, and why we made the difficult decision to leave a fourth friend out just before signing the company incorporation. I take a deep dive into our atypical organizational structure where we decided not to have a single CEO, but rather divide leadership into three areas of absolute responsibility (Tech, Operations, and Marketing) while democratizing cross-functional decisions.

Throughout the video, I detail how we resolve conflicts using asynchronous communication via Linear to remove ego from discussions, how we define our salaries based on the company’s financial health (bootstrapping) rather than investment rounds, and what our philosophy is regarding equal equity splits. If you are considering starting something with your close circle, here you will find our real-world experience on how to align priorities, manage friction, and prevent silent resentment from killing both the company and the friendship.

Chapters

• 0:00 Welcome And Topic Setup
• 2:00 Choosing Friends As Co‑Founders
• 4:10 The Fourth Friend And Alignment
• 8:50 Hard Conversations And Priorities
• 12:25 Shareholders Agreements In Practice
• 17:00 Contracts, Trust, And Complexity
• 20:30 Decision Making Without A CEO
• 24:40 Clear Domains And Conflict Handling

Transcript

SPEAKER_00: 0:07

Hello, everybody, and welcome to Life on Mars. I'm Alex CEO and founder of Marspace. And in this new episode of Building Marspace, we will be discussing working with friends. This comes as a result of a question that we got a few weeks ago. It was a three-parse question. Two of them they were answered in a previous episode. When is the right time to create your company? And this is the missing part of that question that was like, hey, um, how is it working with friends? How do you go about shareholder agreements, discussions, roles, um, remuneration, conflicts, and whatnot? So in this episode, I will be covering all of this. Um, if you haven't watched the first two episodes of the series, just go uh go out and check them because many of the things I will make reference to in this episode, they already covered in episode one and episode two. For instance, when you talk about the background of Martspace, who we are, who the founders are, uh what did we do before Martspace and all of that, that's sufficiently covered in episode one and episode two. But of course, I will be explaining a little bit here more for the context of it, right? So let's just start with the with the first consideration of uh how is it working with friends? First off, you gotta know that Martspace was created by uh Xavi, Jordi and I, three the three co-founders of the company, we have known each other since childhood, more or less since primary school, and the case of Jordi, secondary school, the case of Chavi. But even though our careers intertwined, um working always, you know, here and there, having some joint projects, we never coincided the three of us. But in spite of that, we decided to create a company. But there is a very important consideration here. Actually, the company should have been created by four friends, not three. And that is a very, let's say, very obscure fact that not a lot of people know about, and I think that is uh that provides a good starting point for the for the discussion today. That is, with whom should you partner? Is actually everybody who is your friend is a potential candidate to create a company with, actually not, right? I don't want to disclose too much about this, um just to avoid hurting anybody's feelings. But when you have to create a company with a friend, it is very complicated to be blunt about things or to be very upfront about things. You always try to avoid hurting everybody's feelings, and it's very hard to say no. And if somebody comes to you with an idea, super eager to work with you, that you're really good friends, if you're not 100% convinced, it is always a no, right? Um I covered already extensively in episode one of Building Mars-Based, that the idea of Mars-Based came about 2013, more or less, after a couple of years of trying to build some products that never saw the light of day. But we were meeting, you know, a group of friends, four friends. We were actually meeting for dinner every couple weeks and would discuss, oh, if we were to create a company, we'd do this, we'd do that. We had some ideation processes, we would just like you know, brainstorm uh pain points we had of software solutions we could build and how we would build them. And we actually got hands down to build a couple of them, right? Um, but I already covered what projects were they. The thing that I left for this episode is that when in that phase where we had to decide that we didn't want to be a product company, but we wanted to be a service-based company instead. And we were actually going to make it real, we were going to incorporate the company, we had to make a very important decision, which was to ask everyone in the room, the four people that we were involved in the project, whether we had the right alignment in terms of priorities. Because throughout the course of these two years trying multiple projects, we had seen that the priorities were not a hundred percent aligned with the four people. And so when the time to become real comes, that means signing a contract, incorporating a company, chipping in some money, and putting your face out for the company. That requires real commitment. And one of the things with it was to have a group discussion about where did we place Mars-based in the ranking of priorities, right? Where did Mars based rank in the priorities list of everybody? And three of us, we were really aligned. And we said it was in the top three or top five, you know, among family, health, money, perhaps, or some other important things, but then Mars-based, and then the rest. And this other fourth person, he was not aligned with that. And we had already seen that he was working only, you know, really spare time, um, whenever he had nothing else to do. And um definitely he didn't rank Mars-based, not even in the top ten. And so we knew at that moment that we wouldn't be partnering with him, and as a result of that, that's why we created the company, the three of us. That's harsh, because that means leaving a friend out, and we did have that very difficult conversation. But not having that would have been dangerous for the project, and even more dangerous for the relationship. In the short term, it was harsh, but for the long run, it was better. It saved the company, it saved the relationship. So that's a very good distinction that you ought to make. Um, having these really complicated conversations with the friends that you're going to create a company with or that you're going to invest with or invest in really depends. Um, I don't have a playbook for that. In my personal case, I've been working with friends and family for years and years, almost forever, because I grew up in the context of a family business. But that's not the case of my two co-founders, Chapby and Jordi. They don't have that background. So in my case, the line between family or friendship and business is very blurry, but that might not be the case for everybody else. Just make sure that you have to do this very, very important distinction of what it is at play, what is the upside, and what is the downside for all of this? What are the possible outcomes? Who might get hurt? So once this is understood, I think that we have to jump to the next stage, which is hey, there's got to be a shareholders agreement. And there's a lot of controversy around this because most people that will always say, Oh, make sure you include this in the shareholders agreement, make sure you include that thing. To be entirely honest, Xavi Jordi and I have never had to open the shareholders agreement since we last did it in the first day of the company. We haven't we haven't revised it, we haven't reviewed it, we haven't rewritten it, we haven't amended it. And most likely we will have to do it. In the life of a company, it's pretty common that you have to revise this, even more so if your company raises funds. Because you will have to share uh you have to change the shareholder structure. Maybe you pivot, and when you pivot, you're changing substantially what the original agreement was, and then you have to reflect it on the shareholder's agreement. In our case, the company is the same kind of company that we were 12 years ago. It was a company split in three parts, three equal parts for its co-founder, and we do the same thing with it 12 years ago. We provide IT services to others. And that's it. That hasn't changed. Nothing has ever been amended, nothing has ever been touched from that agreement. And I don't know when that will happen, but that is not the reality for most companies. Most companies have to change this. For instance, now speaking as a business angel, I've seen a few things. It hasn't happened to me, but I know or I've heard a couple of occasions in which the one of the founders of the companies, a friend had invested in, died. And that was not covered by the shareholders agreement or the you know the the the kind of contracts that you write between investors and founders, right? I'm not saying every contract should have that. But of course, my friend now includes this provision in every contract now that he signs with the company he invests in, right? So I think that this SCART issue left by some mistakes or things that we have overseen in the past might make them the future contracts more complicated. And that is not in the spirit of Marspace. That's not in the our company culture where we like things are simple because simpler is better. In our case, we could do so like probably we could change some things, uh some provisions in the contract. Like, for instance, they say that contracts between founders bring problems when things go really bad or when they go really well. In our case, it just goes well. The company stays afloat after 12 years, we make money, we're bootstrapped, we're profitable, uh, our team keeps growing organically every year. But I wouldn't say it's a dazzling success in which we're making millions and millions every month, and we have never had a big setback that we have lost a ton of money or somebody fucked up big time, and therefore we have never engaged in very big disputes. But that is the reality of a lot of companies, and definitely that should be part of your shareholders' agreement. Um, that of course gives more work to lawyers. So just bear in mind that whoever is telling you that you have to have all of these provisions set in stone in the contracts, it's lawyers. Why? Because they want your work, they want your money. And uh at the end of the day, contracts, and that is very, very important, I think. A contract is only a snapshot of the status of a relationship in a given point in time. There might be other enforcing circumstances that are not covered by the contract. And of course, the better the contract is, the more enforcing circumstances you can cover and protect yourself from. At the same time, it becomes more complex. And once you present somebody with a contract that is very complex, the message you're conveying is I'm not trusting you. Is that the kind of relationship you want to have with your partners, with your co-founders up front? That depends on you. That's not our style, that's not how I would do it. Another thing that is very important is the how you define the decision-making process in the company. In our case, we decided that the company was not gonna have a CEO right from the get-go. Partly because I think the three of us wanted to be the CEO, and partly because I think no one really wanted to be the CEO. Let me explain that. The CEO is somehow at the top of the other C levels in the company, right? Everybody reports to the CEO. Might be that on paper, some people say, Oh, if your founders are on the same level, CTO, COO, CMO, whatever, and the CEO as well, right? But at the very end of the day, the CEO is the ultimate decision maker in the company. And therefore, because we were set back from or held back from our friendship, perhaps, we said, like, oh, I don't want to be more than my co-founders. That was my logic. Therefore, I don't want to be the CEO. But at the same time, it would be very cool to be the CEO of the company you create, right? Instead of other things. In my case, I was not qualified to be the CTO. I could have been the COO, but I decided to be the CMO marketing, chief of marketing. Jordi adopted the COO operations role, and Charlie CTO, chief technical officer. Um so the way we decided that we were going to organize ourselves and decide on things was hey, everybody gets an area or a few areas. He will be responsible for those ones. And the things that are common to the three of us, they will be decided by pure democracy. So everything that was technical, so how to do the projects, the technological stack, and the order how we would do things, documentation, stuff like that, that would be Chavez department and area, and he would be the final decision maker in that department. Finance, operations, even legal, uh project management, that would be George's department, as he was chief operation officer and still is. And sales and marketing was my department. And then other things like company culture, strategy, innovation, even investment, that would be part of the these joint areas that we would have. So effectively speaking, we were halfway between a three-headed CEO and a CEO-less company, right? And more like a flat hierarchy in this regard. And I think that has worked pretty well. Uh I will cover in more detail the evolution of the roles at Marspace because I think only one has changed. I became the CEO eventually, but that was because it was weird when I approach a client as a CMO of a company trying to sell technology. CMO should only do marketing. And so I requested to have the CEO title only outwards. My CEO title just works when I'm looking outside of the company, so that people come to me expecting to talk to the CEO. Because it's weird that a company doesn't have a CEO. Even more so they're trying to sell you something. But inside of the company, we still the three of us are the CEO of the company. And I think that's a very important distinction to make. The other thing is conflict solving. Right? How do you solve for conflicts when you have these sort of these sort of decision areas so compartmentalized? And I think just that this sheer division of the concerns just explain helps to explain how this side thinks at Mars-based. Um there is little to no question whenever Chavi decides, oh, we are going to bet on React over Angular. We are not doing Ionic anymore, we'll just invest in React Native henceforth for mobile development, right? Jordi and I can have an opinion. We might be able to influence Xavi with that, but that is not our department. Whatever Chavi says goes. We can make a case sometimes that the two other co-founders can team up and try to build a compelling argument for a discussion. But that rarely ever happens. I can't, for the love of me, remember a single occasion where that has happened. Usually, if somebody is set on a decision on their area, that just stays. And that's always been when I decided, oh, look, we're not gonna have a CRM in the company because I'm the only person doing sales in the company. Even though Xavi and Jordy maybe wanted to have a CRM, I was the only one using it. It's my department, my call, and that decision still stays nowadays. Um But for the joint um decision areas of the company, we do have our ways of discussing, debating, and coming to agreements. Usually there's a lot of negotiation involved. Um, I don't have any secret sauce here to share with you. Usually we the way we approach very difficult conversations is we have them in written long form. That is, we use linear for everything in the company from managing projects to hiring people, but also to decide things. Uh we work pretty asynchronously when it comes to making decisions for the company, because Tavi Jordi and I have a shareholders meeting or a founders' meeting every every quarter. But before that, we tend to present the most complicated topics that we want to discuss in that meeting in long written form. Why? Because they're more thought out, they're well written. If you write something and you make your arguments and they're very structured and it's clear and concise, you have already part of a winning point here. And also you make sure that the other part is not able to interrupt you. They can comment, they can add some stuff to conversation, but at least you're able to present your point 100% before there's any sort of counter-argument. And in a significant percentage of the occasions, most of these discussions are resolved on linear. They don't make it to the meeting. Why? Because sometimes like, okay, yeah, I agree with you. Or I don't have anything to say here, or it's not my area, whatever you say goes. Or we have a long-winded conversation, but we end up, you know, making concessions here and there and trade-offs, and we come to an agreement or very close to an agreement, so that when we go to the founders' meeting every quarter, that is 95% discussed. We don't waste any time. Just repeating over and over the same arguments because that has been done already on Linear. That saves a lot of time and a lot of friction, actually. So I think that is uh I think it's a good way to approach these kind of things. Might not work for companies that have got an office. We don't have an office. We don't bump into each other. There's no possibility that we, or very rarely, we bump into each other. There's little to no possibility that I bump into Xavi in the street and like, oh what that thing you just said on linear, I don't agree with that, and let's just have a conversation here. That would happen in an office, but not in a company that has got no office. So that's one of the pros of being a hard remote company. What else? Remuneration, for instance. Salary ranges. That's that's an interesting topic. Um when we created the company, we defined how much we would earn, but that was strongly tied to the cash position we had. And of course, in the early days of the company, we didn't have a lot of money. And so we defined, as I mentioned in episode one, we defined a certain set of rules that we or goals we had to meet before earning any money from the company, right? And that was a certain amount of cash in the bank, certain amount of recurrent revenue coming into the company. And if I remember correctly, the first salary we ever paid ourselves was a thousand euros in the bank. We tried doing it the same amount of money for everybody, for everybody that was working in the company full-time. If at a certain point one of the founders was not working full-time in the company, he wouldn't earn that money. Um just because it was needed to keep the company afloat. And then we revised the salary every year or whenever we thought we deserved something better. Usually that comes with team size. Startups doing uh startups who raise money, PC money, usually they do it, you know, if they are pre seat, they have like barely know um the salary for the founders, then the founders get a little bit of salary and a little bit of a cash injection in every um funding round. And you know that by a hundred people headcount or series A, stuff like that, you get this market-defined salary. In our case, we're independent, we're able to give ourselves the salary we think we deserve. We increased it slightly every every year or every few months, depending on how flush we were with cash or not. That also comes with dividends. This is one thing that has to be in the shareholders' agreement. This is one thing that we have revised every year in our quarterly meetings, but also in the annual meetings. So that's something that if it's set in stone, all the better. So you should be you should be able to say something like, Hey, we will revise our salaries once per year. Um if there's this minimum amount of profit that should be paid out as dividends for the founders or for the team, whatever, right? So this is the kind of things that you want to make clear from the get-go, especially through your working with friends. And it's one of the last points of the of the episode is what happens when this relationship is not compensated. In some companies, you have a one of the co-founders who just brings investment, knowledge, or expertise, field expertise, and works full-time in the company, while another one just works full-time in the company. And so therefore, this is not compensated, right? Because you both work 40 hours, therefore, you would deserve the same kind of equity, but this other person brings equity and knowledge in the field, so therefore they're at more advantaged position. I'm not a huge fan of these kinds of um relationships because they are not compensated and they are asymmetrical. And at a certain point, they will bring more friction than other kinds of equations. In our case, we said Tavula Raza, we all are valued at the same. We more or less have got the same age, we chip in the same kind of money into the company, we bring context and expertise at the same level, so no one is gonna have more percentage than the others. In our case, it was very easy. There are some formulas out there. Um just I would advise if you're working with really good friends, against these sort of uncompensated relationships. Try to make it maybe not 50-50 if you're two, because that brings a lot of decision problems um down the road. But if you're three, it's it's not a bad split. It's hard. There's no 50-50 tie possible. And also, it doesn't allow for this kind of conflicts. Also, there might happen that your relationship is equal on the first days and on the first year, but then it changes. New situation, right? Somebody who is not able to work full-time anymore, or somebody who says, like, I want to take a step um sideways, or something like that. Relationships change. If it's for very short term, if it's for like a couple months, I wouldn't touch anything. Might not be fair that somebody just takes two months off uh while the others keep working, but you will compensate in other ways. Uh, and if you're good friends, you will understand. It's the same as if somebody has been super stressed or overworked and their performance or creativity hasn't been the best, or they have been like having bad, you know, uh a bad attitude towards something, it will even out in the end. If it extends for longer than three months or say like six months, that's something that maybe requires changing salaries or making some kind of compensations to the other people. If that should extend for longer than six months and go into a full year, for instance, taking a sabbatical, or I want to change priorities in my life, or I want to I want to invest more in the company because uh um I'm really flesh with cash and I really believe in this, then you definitely need to change the shareholders' agreement and make that clear what happens, who does what, what are the compensations, and what happens if this doesn't work out and you have to revert it. So to wrap things up, I think that I've covered pretty much everything that I wanted to say here. Of course, there are a lot of nuances, so feel free to send more questions for specifics, right? We haven't covered like working hours, we haven't covered um the exit times, we haven't covered how to have difficult conversations with the other partners and stuff like that, but they are much more specific, and I don't want this to extend any longer, just uh to make sure that you've got a clear communication with your business partners, especially if they are friends. And I think that as a parting thought, one of the things that I really wanted to share is like any uncommunicated desire always brings friction. So if you don't present your partners with whatever idea you have that is burning inside of you, if there's something that really makes you feel bad or sad or um any kind of asymmetrical comparison with somebody else, and you think that's not fair, you have to bring it up. You have to discuss it because otherwise that will create the snowball effect. Like the ball gets bigger and bigger and bigger, and that eventually erodes the relationship that can pose a very big threat. If you have a conflict, it's better to just remove it from the table as soon as possible, just present it, discuss it, call for an urgent meeting, don't wait, because the accumulated tensions, they just they might create um worse outcomes for everybody, and just um just communicate what you what you want to get out of this and uh what try to find a proactive and creative and constructive solution for everybody. So, with that being said, thank you uh for listening to this episode. Thank you for watching. If you like this kind of content, subscribe and like this video, and make sure you send more questions. I'm always happy to take more questions. You'll see that there will be some episodes with no questions, it's just me ranting about something or rambling for an hour or half an hour, and some other episodes will come with questions from the audience. So thank you for this one, and I'll see you in the next episode. Bye.